Fiat plans two-year lay-off scheme at Melfi plant

Reuters Staff

3 Min Read

The Fiat logo is displayed during the second media day of the 80th Geneva Car Show at the Palexpo in Geneva March 3, 2010.Denis Balibouse

TURIN (Reuters) - Fiat FIA.MI has asked the government to approve a special lay-off scheme at its Melfi plant in southern Italy so the company can restructure it before production of new models starts, the car maker said on Tuesday.

The temporary lay-off scheme, which will kick off on February 11 and last until the end of 2014, will allow Fiat to stop its two production lines at the plant.

Melfi, one of Fiat's most important facilities in Italy, currently makes the Punto model.

Government spending cuts and high unemployment have squeezed consumer budgets and sent demand for cars plunging across Europe where the industry already suffers from overcapacity.

Like other car makers, Fiat, which controls U.S. carmaker Chrysler, has been hard hit by Europe's debt crisis. Last year car sales in Italy slumped to their lowest level since 1979.

In a statement, a Fiat spokesman said the request had been made so as "to continue producing the Punto on the basis of market demand and make the investments needed for building two new models."

Back in December, Fiat said it would invest 1 billion euros ($1.3 billion) to produce a new Jeep and a new Fiat 500 in Melfi from 2014.

The economic spokesman for the centre-left Democratic Party, currently ahead in opinion polls for February elections in Italy, criticized Fiat's move, calling on the government to meet with the company before approving any such scheme.

"The request for the special lay-off scheme is clear. The impact on workers' salaries will also be clear and grave," Stafano Fassina said in a statement.

Raffaele Bonanni, leader of CISL, one of Italy's leading trade unions, said it was normal to proceed in this way in cases of restructuring.

"We'll see if it's possible to avoid it ... in coming months we will watch things to make sure Fiat keeps its promises," he said.

Pierluigi Bellini of Global Insight told Reuters new car sales for 15 European states plus Switzerland are expected to have fallen 15.8 percent in December from a year earlier.